BAYBAY WATER DISTRICT v COA

G.R. NO. 147248-49 | January 23, 2002 | Mendoza, J.
Facts
 1996: The Resident Auditor of the Baybay Water District conducted an audit
of its 1994 accounts.
o In the course of the audit, the auditor disallowed payments of per
diems in excess of those authorized by the Local Water Utilities
Administration (LWUA) and P.D. No. 198, RATA (representation and
transportation allowance) and rice allowances granted to the
members of the board of directors of the BWD, as well as duplication
of claims for cash gifts as part of the Christmas bonus of the general
manager and traveling allowance of the officers of the BWD.
o The members of the board (petitioners), the officer who had
approved the release of these benefits, were served with notices of
disallowance.
 Petitioners asked for reconsideration but the Resident Auditor denied their
request on the ground that the disallowance had become final and executory.
 Petitioners then appealed to the COA Regional Office which affirmed the
findings of the Resident Auditor.
 On appeal to the COA, the Commission affirmed the Regional Office.
Issue: WN the BWD officers and employees are entitled to receive the benefits in
excess of that authorized  NO
Held
Applicable law: PD 198, Sec 13 (as amended by PD 768 and PD 1749)
Compensation. — Each director shall receive a per diem, to be determined by
the board, for each meeting of the board actually attended by him, but no
director shall receive per diems in any given month in excess of the equivalent
of the total per diems of four meetings in any given month. No director shall
receive other compensation for services to the district. Any per diem in excess
of P50 shall be subject to approval of the Administration.
Petitioners’ Argument
Term “compensation” in the provision doesn’t include the allowances and per diems
which had been disallowed in this case.
- Cite Section 2, PD 1146 which provides that compensation means "the
basic pay or salary by an employee, pursuant to his
employment/appointment, excluding per diems, bonuses, overtime pay,
allowances and any other emoluments received in addition to the basic pay
which are not integrated into the basic pay under existing laws."
SC: The statutory provision invoked is not applicable!
- It refers to the basis for the computation of employer and employee
contributions to the GSIS as well as the benefits to which such employees are
entitled. In the same manner and as an example, the Court cites §32 of the
National Internal Revenue Code where "compensation" includes fees,
salaries, wages, commissions, and similar items for purposes of recognizing
taxable income.
- The definitions of the term "compensation" in these statutes are for limited
purposes only and cannot be deemed to comprehend such other purposes
not specifically included in the provisions thereof.
Petitioners’ Argument
The prohibition in P.D. No. 198, §13 against the grant of additional compensation to
board members must be deemed repealed by virtue of §22 10 of R.A. No. 6758
(Salary Standardization Law), which took effect on July 1, 1989.
- contend that §13 of P.D. No. 198 is inconsistent with Section 121 and
Section 172
SC: The Salary Standardization Law doesn’t apply!
- Section 4 of the aforementioned law specifically provides that the Salary
Standardization Law applies to "positions, appointive or elective, on full or
part-time basis, now existing or hereafter created in the government, including
government-owned or controlled corporations and government financial
institutions."
o Positions: Professional Supervisory Category, Professional Non-
Supervisory Category, Sub-Professional Supervisory Category, Sub-
Professional Non-Supervisory Category3
ITC: the Salary Standardization Law does not apply to petitioners because directors of
water districts are in fact limited to policy-making and are prohibited from the
management of the districts.
- Also, the law describes allowances as “benefits” paid in addition to the salaries
incumbents are presently receiving. This doesn’t refer to the compensation of
the board of directors of water districts because they don’t receive salaries but
per diems for their compensation.
- Even the Local Water Utilities Administration (LWUA), in Resolution No. 313
s. 1995, entitled "Policy Guidelines on Compensation and Other Benefits to
WD Board of Directors," on which petitioners rely for authority to grant
themselves additional benefits, acknowledges that directors of water districts
are not organic personnel and, as such, are deemed excluded from the
coverage of the Salary Standardization Law.
Petitioners’ Argument

1 Sec. 12. Consolidation of Allowancesand Compensation. — All allowances, except for representation and transportation
allowances; clothing and laundry allowances; subsistence allowance of marine officers and crew on board government
vessels and hospital personnel; hazard pay; allowances of foreign service personnel stationed abroad; and such other
additional compensation not otherwise specified herein as may be determined by the DBM, shall be deemed included in
the standardized salary rates herein prescribed. Such other additional compensation, whether in cash or in kind, being
received by incumbents only as of July 1, 1989 not integrated into the standardized salary rates shall continue to be
2 Sec. 17. Salaries of Incumbents. — Incumbents of positions presently receiving salaries and additional
compensation/fringe benefits including those absorbed from local government units and other emoluments, the
aggregate of which exceeds the standardized salary rate as herein prescribed, shall continue to receive such excess
compensation, which shall be referred to as transition allowance. The transition allowance shall be reduced by the amount
of salary adjustment that the incumbent shall receive in the future.
3 See notes

authorized.
 Cite SC decision Davao City Water District v CSC where it was declared that water
districts are GOCCs subject to the jurisdiction of the COA, water districts had already
been granting additional benefits to members of the board of directors, with the
approval of the LWUA, and to their officers and employees and that they continued
doing so after the promulgation of the decision in that case.
- Petitioners contend they have thus acquired a vested right to these
benefits
SC: The erroneous application and enforcement of the law by public officers does not
estop the Government from making a subsequent correction of such errors.
- where there is an express provision of law prohibiting the grant of certain
benefits, the law must be enforced even if it prejudices certain parties due to
an error committed by public officials in granting the benefit.
- Practice, without more, no matter how long continued, cannot give rise to any
vested right if it is contrary to law.
ITC: the findings of the Resident Auditor were not only supported by the evidence, but
they remained unrebutted by petitioners who simply relied on claims based on
impairment of vested rights and diminution of benefits.
Petitioners’ Argument
Cite De Jesus v COA, Philippine Ports Authority v COA and Manila International
Airport Authority v COA
- De Jesus: held that the circular issued by the Department of Budget and
Management to implement the Salary Standardization Law, which
discontinued the payment of allowances and fringe benefits previously
granted on top of basic salary, was ineffective for lack of publication in the
Official Gazette or in a newspaper of general circulation, as required by law
- PPA: issue resolved was the right of employees to receive RATA over and
above the standardized salary after the effectivity of R.A. No. 6758.
SC: These cases are not in point as the issues in the present case are, to repeat
1. whether members of the board of directors of water districts are entitled to
receive even after the effectivity of the Salary Standardization Law benefits
other than their authorized per diems, contrary to the provisions of their charter
and the resolution of the LWUA
2. whether the disallowance of duplication of claims of transportation allowance
to BWD employees, as well as the grant of RATA, rice allowance, and
excessive per diems to members of the board of directors of BWD, would
impair vested rights and violate any rule against diminution of benefits and
undermine the management prerogative of the BWD; and
3. whether the BWD officers and employees are entitled to receive benefits in
excess of that authorized by law.
Petitioners’ Argument
Invoke management prerogative to justify the grant of allowances and other benefits
to both the board of directors of BWD and its officers and employees
SC:
BOD: No basis for such contention
-management prerogative refers to the right of an employer to regulate all
aspects of employment, such as the freedom to prescribe work assignments,
working methods, processes to be followed, regulation regarding transfer of
employees, supervision of their work, lay-off and discipline, and dismissal and
recall of work.
- Clearly, the existence of such right presupposes the existence of an employer-
employee relationship.
- ITC: BWD BOD are not employees of BWD
Officers and employees
- Terms and conditions of employment of government employees are governed
by law, therefore the exercise of management prerogative is limited by the
provisions of law applicable
Petitioners’ Argument
Similar benefits are granted to the directors of NAPOCOR
SC: No basis for comparison
- The grant of other allowances to NAPOCOR board members is based on the
Revised NAPOCOR Charter (R.A. No. 6395, as amended by P.D. No. 1360)
- The charter of NAPOCOR expressly granted members of its board of directors
the right to receive allowances in addition to their per diems, subject only to
the approval of the Secretary of Energy, unlike PD No. 198
Dispositive: WHEREFORE, the petition for certiorari is DENIED and the decision of
the Commission on Audit, dated September 21, 2000, as well as its resolution, dated
January 30, 2001, is AFFIRMED.
SO ORDERED.
Notes
(a) Professional Supervisory Category . — This category includes responsible positions of a managerial character involving the
exercise of management functions such as planning, organizing, directing, coordinating, controlling and overseeing within
delegated authority the activities of an organization, a unit thereof or of a group, requiring some degree of professional, technical
or scientific knowledge and experience, application of managerial or supervisory skills required to carry out their basic duties and
responsibilities involving functional guidance and control, leadership, as well as line supervision. These positions require intensive
and thorough knowledge of a specialized field usually acquired from completion of a bachelor's degree or higher degree courses.
The positions in this category are assigned Salary Grade 9 to Salary Grade 33.
(b) Professional Non-Supervisory Category . — This category includes positions performing tasks which usually require the
exercise of a particular profession or application of knowledge acquired through formal training in a particular field or just the
exercise of a natural, creative and artistic ability or talent in literature, drama, music and other branches of arts and letters. Also
included are positions involved in research and application of professional knowledge and methods to a variety of technological,
economic, social, industrial and governmental functions; the performance of technical tasks auxiliary to scientific research and
development; and in the performance of religious, educational, legal, artistic or literary functions. These positions require thorough
knowledge in the field of arts and sciences or learning acquired through completion of at least four (4) years of college studies.
The positions in this category are assigned Salary Grade 8 to Salary Grade 30.
(c) Sub-Professional Supervisory Category. — This category includes positions performing supervisory functions over a group of
employees engaged in responsible work along technical, manual or clerical lines of work which are short of professional work,
requiring training and moderate experience or lower training but considerable experience and knowledge of a limited subject matter
or skills in arts, crafts or trades. These positions require knowledge acquired from secondary or vocational education or completion
of up to two (2) years of college education. The positions in this category are assigned Salary Grade 4 to Salary Grade 18.
(d) Sub-Professional Non-Supervisory Category . — This category includes positions involved in structured work in support of
office or fiscal operations or those engaged in crafts, trades or manual work. These positions usually require skills acquired through
training and experience or completion of elementary education, secondary or vocational education or completion of up to two (2)
years of college education. The positions in this category are assigned Salary Grade 1 to Salary Grade 10.